India’s foreign trade and investment landscape has undergone significant transformation, positioning the country as a global hub for both inbound and outbound investments. Here’s an in-depth look at the latest trends, key sectors, and future prospects for foreign trade and investment in India.
Current Trends in Foreign Direct Investment (FDI)
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India recorded $40.67 billion in FDI inflows till December 2024 for FY 2024-25, marking a 27% increase over the previous year and crossing the $1 trillion cumulative FDI milestone since April 2000.
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Despite a global slowdown, India ranked as the sixteenth-largest FDI recipient worldwide in 2023, with inflows of $28.1 billion.
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The first quarter of FY 2024-25 saw a robust rise in FDI, reaching $6.9 billion, up from $4.7 billion in the same period last year, driven by a 26.4% increase in gross inward FDI.
Key Sectors Attracting Foreign Investment
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Services (16.3%)
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Computer Software & Hardware (15.1%)
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Trading (6.5%)
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Telecommunications (5.6%)
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Automobile Industry (5.3%)
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Construction & Infrastructure (5%)
The renewable energy sector saw a 50% jump in FDI to $3.76 billion in FY 2023-24, while the power sector surged 144% to $1.7 billion. Major projects, like the $11 billion semiconductor fab by PSMC and Tata Electronics in Gujarat, highlight India’s focus on high-tech manufacturing and innovation.
Top Sources of FDI
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Mauritius (25%)
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Singapore (23.6%)
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United States (9.6%)
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Netherlands (7.4%)
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Japan (6.1%)
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United Kingdom (5%)
Leading Indian States for FDI
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Maharashtra leads with $16.65 billion in FDI inflows in FY 2024-25, accounting for 31% of the national total, thanks to its robust infrastructure and investor-friendly policies.
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Other top states include Karnataka, Gujarat, Tamil Nadu, and Delhi NCR, each with strong sectoral strengths and policy incentives.
Government Initiatives and Reforms
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The Indian government continues to liberalize FDI policies, especially in strategic sectors like insurance, where the FDI cap is set to rise from 74% to 100%.
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Reforms such as the abolition of retroactive taxation, simplification of tax compliance, and the introduction of the Goods and Services Tax (GST) have improved the ease of doing business.
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The majority of sectors are open to FDI under the “automatic route,” requiring only central bank notification, while sensitive sectors like defense require government approval.
Challenges and Opportunities
Opportunities:
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India’s vast consumer market, demographic dividend, and digital transformation are major draws for global investors.
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The country’s push for infrastructure-led growth and high-tech manufacturing is creating new investment avenues.
Challenges:
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High tariffs, protectionist measures, and complex regulations can hinder foreign participation in some sectors.
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Excessive bureaucracy and corruption remain concerns, though ongoing reforms aim to address these issues.
Outbound Investment: India’s Global Footprint
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India’s outward FDI commitments nearly doubled to $6.8 billion in April 2025, reflecting the growing global ambitions of Indian companies.
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Key destinations for Indian outbound FDI include Singapore, Mauritius, and the United States, spanning sectors like technology, finance, and manufacturing.
Final note
India’s foreign trade and investment environment in 2025 is marked by strong growth, dynamic reforms, and expanding global engagement. As the government continues to enhance the regulatory framework and invest in infrastructure, India is set to remain a top destination for foreign investors, while Indian firms increasingly make their mark on the global stage.
With inputs from agencies
Image Source: Multiple agencies
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